Managing reputational risk in a debt sale for a large B2C energy supplier

Written by Kev Brown
02 Sept 2023
Debt
  • Large B2C energy supplier required guidance around the possibility of selling debt and the potential impact on its reputation
  • We conducted a debt feasibility study, establishing which customer accounts could be sold, presenting an expected valuation and risk-level for each purchaser
  • Our Debt Sale team supported key stakeholders with a reputational risk assessment, before proceeding with a final sale

Challenge

Our client, a large B2C energy supplier, wanted to explore the possibility of selling segments of its customer debt book, and whether this would be viable from a financial and reputational perspective.

The latter is a major consideration when engaging in a debt sale, requiring informed decisions around which accounts to sell, and to which purchaser, to avoid unexpected reputational damage.

Applying extensive experience of the sale process, our Debt team supported the supplier by identifying the potential risks attached, both internally and externally. This included carrying out problem solving workshops with key stakeholders, and presenting a clear view of the advantages and disadvantages for each shortlisted purchaser.

Alongside this, we deployed a debt feasibility study for the client, providing guidance around which accounts are appropriate for sale, while also giving an accurate valuation of the associated debt.

Our approach

After understanding our client’s expectations for the project, we analysed their customer data and sought to rectify any issues that may impact the value of the debt, or the progress of the final sale.

We also agreed an exclusions criterion with the client, ensuring that any unsuitable or low value customer accounts were removed from the process. This was supported by the creation of customer segments and a final analysis of data quality, allowing us to establish an accurate valuation of the debt.

Next, we carried out pre-sale engagements with an extensive network of potential purchasers, looking to understand levels of interest and market conditions. This allowed us to provide a realistic appraisal of the sale, presenting a set of opportunities to the supplier, each categorised based on risk-level and expected sale price.

Results

Upon completion of the feasibility study, we identified ~£50m of appropriate customer debt for sale, with this figure varying based on the potential purchaser involved.

Before proceeding with our client’s choice of purchaser, we completed a reputational risk assessment exercise with key stakeholders, helping to alleviate any final concerns around the sale.

Our specialist Debt team continue to provide support with managing the sale, ensuring progress is smooth and achieved within the timeframe expected.

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